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Trading Services

(o) Foreclosures

NOTE: Licensees who have limited experience in foreclosure transactions should seek guidance from their managing broker. This is a complex area of real estate where unforeseen hurdles can cause serious problems for the licensees and the public.

**Alert**

In many cases, the party that has conduct of sale in the foreclosure requires that many of the standard clauses in a Contract of Purchase and Sale be amended. The amended clauses are generally contained in a Schedule to the contract. The Schedule may provide, for example, that the buyer is purchasing the property on an ‘‘as is, where is’’ basis as of the completion date. Licensees acting on behalf of buyers should review the Schedule of amendments carefully with the buyer to ensure that the buyer understands the implications of the amendments on their purchase.

Once a property is subject to foreclosure proceedings, any party who may be potentially affected by the foreclosure proceeding may apply to court for conduct of sale. Licensees need to be careful as the court can order any party it sees fit to have conduct of sale, with the right to list or sell the property in a certain manner. This type of order could have the effect of denying a registered owner from listing a property or, perhaps, voiding an existing listing agreement. This court appointment allows the party having conduct of sale to put the property up for sale and it may prevent anyone else from listing the property (even the owner).

It is important all licensees recognize that where they have a listing on a property that may be subject to foreclosure proceedings, their listing may be voided by a court order at any time. It is also important to note that the court process involving the manner in which offers are presented in court and the court’s consideration of offers may differ considerably from the licensee’s usual practice. Licensees are urged to be careful when acting for buyers and sellers to ensure that any offer, subject to court approval, is in acceptable form, including the manner in which the potential buyers wish to be shown on title (tenants in common or joint tenants). It is costly to have an Order Approving Sale amended after it has been pronounced. Licensees should also have their buyers and sellers consult their lawyers about dates — both as to court approval and completion — as the time required to have orders for sale approved may have increased as a result of changes to rules regarding foreclosure practice. Licensees should also be alerted to the fact that orders of the court could be appealed to a higher court.